Bank of America CEO alleges a cover-up

Ken Lewis, embattled CEO of Bank of America (BAC), says that he was encouraged to keep problems at Merrill Lynch to himself. It is a convenient defense of what is viewed as a merger gone wrong, but it may be true nonetheless.

According to an exclusive report in The Wall Street Journal, "Federal Reserve Chairman Ben Bernanke and then-Treasury Department chief Henry Paulson pressured Bank of America Corp. to not discuss its increasingly troubled plan to buy Merrill Lynch & Co. -- a deal that later triggered a government bailout of B of A -- according to testimony by Kenneth Lewis." The reason Lewis was urged to stay silent was apparently concern that if the Merrill deal failed due to losses, it would cause panic in the financial markets.

If Lewis is telling the truth, and there is little reason for him to lie to the government, he has a "get out of jail free" card. All of the criticism that he was stupid or incompetent to buy Merrill as its losses mounted goes away. He almost becomes a hero for helping hold off a potential collapse in the shares of financial firms. He took a bullet for the government by keeping quiet in the face of severe criticism

In other words, Lewis is a great guy who should get to keep his job at BAC and even get a healthy bonus.